New Delhi, Jan 03 (PTI) The Supreme Court said on Wednesday the reliance placed by the petitioners on newspaper articles or reports by third-party organisations to question a comprehensive investigation by SEBI into allegations of accounting fraud and stock manipulation levelled by US short seller Hindenburg Research against the Adani Group does not inspire confidence.
In its verdict on a batch of pleas on the Adani-Hindenburg row, the apex court noted that to assail the adequacy of the Securities and Exchange Board of India’s (SEBI) probe so far, the petitioners have sought to rely on a report published by OCCRP and referred to by various newspapers.
A bench headed by Chief Justice D Y Chandrachud noted that the petitioners’ case appears to rest solely on inferences from the report by Organised Crime and Corruption Reporting Project (OCCRP), a third-party organisation involved in investigative reporting, and the petitioners have made no effort to verify the authenticity of the claims.
“The reliance on newspaper articles or reports by third-party organizations to question a comprehensive investigation by a specialized regulator does not inspire confidence. Such reports by ‘independent’ groups or investigative pieces by newspapers may act as inputs before SEBI or the expert committee. However, they cannot be relied on as conclusive proof of the inadequacy of the investigation by SEBI,” the bench said.
The bench, also comprising Justices J B Pardiwala and Manoj Misra, said the veracity of inputs and their sources must be demonstrated to be unimpeachable.
“The petitioners cannot assert that an unsubstantiated report in the newspapers should have credence over an investigation by a statutory regulator whose investigation has not been cast into doubt on the basis of cogent material or evidence,” it said.
The bench noted the petitioners have also relied on a letter dated January 31, 2014 sent by the Directorate of Revenue Intelligence (DRI) to the then SEBI chairperson.
“The letter purportedly alerted SEBI about inter alia potential stock market manipulation by the Adani group through over-valuation of the import of power equipment from a UAE-based subsidiary. According to the petitioner, SEBI did not disclose the receipt of the letter and did not take adequate action based on it,” it noted.
It said the SEBI has submitted that after receiving the letter, it sought information from the DRI on the issue and received the requisite inputs.
“Further, while SEBI examined the preliminary alerts by the DRI, the Additional Director General (Adjudication), DRI concluded their examination and held that the allegations were not established,” the bench said, adding that order of the Additional Director General was assailed by the Commissioner of Customs before the Customs, Excise and Service Tax Tribunal (CESTAT).
It noted the CESTAT passed an order on November 8, 2022 dismissing the appeal and concluding that the allegation of overvaluation was not proved and that order was upheld by the apex court in March last year.
“The petitioner is re-agitating an issue that has already been settled by concurrent findings of the DRI’s Additional Director General, the CESTAT and this Court. Therefore, the petitioner’s assertion that SEBI was lackadaisical in its investigation is not borne out from the reference to the letter sent by the DRI in 2014,” the bench said.
It said in this case, the apex court has already exercised its extraordinary powers by setting up an expert committee to assess the situation in the market, suggest regulatory measures and investigate whether there has been a regulatory failure.
“To expect the court to monitor the investigation indefinitely, even after the committee has submitted its report and SEBI has completed its investigation in 22 out of 24 enquiries is not warranted,” the bench observed.
“The reliance placed by the petitioner on the OCCRP report to suggest that SEBI was lackadaisical in conducting the investigation is rejected. A report by a third-party organization without any attempt to verify the authenticity of its allegations cannot be regarded as conclusive proof,” it said.
The judgment was delivered on PILs filed by lawyers Vishal Tiwari, M L Sharma, Congress leader Jaya Thakur, and Anamika Jaiswal.
The Adani Group stocks got bludgeoned on the bourses after Hindenburg Research made a litany of allegations, including those about fraudulent transactions and share-price manipulation, against the business conglomerate.
The Adani Group dismissed the charges as lies, saying it complies with all laws and disclosure requirements.
